Drug development is resource intensive. It typically takes years, an army of drug development professionals, and significant financial investment to get a single drug from concept to approval. However, even with such tremendous effort and expense, most drugs never make it to approval. Because of the vast resources required and the high risk of failure, it stands to reason that there should be certain protections to make these investments viable over the long term. Among the key counterweights to the high cost of drug development are drug pricing, patents, and marketing exclusivity.
On the surface, pricing, patents, and exclusivity seem fairly straightforward. Pricing allows drug developers to recoup capital investments (plus profit). Patents protect intellectual property rights and marketing exclusivity prevents competitors from flooding the market with their own versions of the drug for a designated period of time. However, these issues tend to be more complex than they appear, and are often misconceived by the general public, politicians, and even drug development professionals. While all three are critically important topics, in this blog post, we will focus on marketing exclusivity.
What is Marketing Exclusivity?
Unlike a patent, which is generally acquired early in development, runs considerably longer, and is based upon intellectual property rights rather than evidence of safety and effectiveness, marketing exclusivity is granted only upon approval of a drug by the FDA and only when statutory requirements are met.
Exclusivity puts into place a period of time during which no other applications can be accepted and/or approved for the same active ingredient. This means that other manufacturers that may wish to develop alternative formulations or generic versions of the drug will not be able to have their products approved during the exclusivity period.
The length of the exclusivity period depends upon the type of exclusivity that has been granted. Importantly, the exclusivity period is not added to patent life, so sponsors will need to be mindful of both durations and plan accordingly.
Regulatory Basis for Marketing Exclusivity
The most common types of exclusivity are described in 21 CFR 314.108. These statutes were put into place with the passage of the Drug Price Competition and Patent Term Restoration Act of 1984, which is known informally as the Hatch-Waxman Act. Additional legal authorities and updates to exclusivity regulations have been enacted via a number of other laws, including:
- Orphan Drug Act of 1983 (ODA)
- Food and Drug Administration Modernization Act of 1997 (FDAMA)
- Best Pharmaceuticals for Children Act of 2002 (BCPA)
- Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA)
- Biologics Price Competition and Innovation Act of 2009 (BPCIA)
- Patient Protection and Affordable Care Act of 2010 (PPACA; informally known as Obamacare)
- Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA)
- 21st Century Cures Act of 2016
Types of Marketing Exclusivity
There are several types of marketing exclusivity, varying both in duration and the statutory requirements that must be met. Some are based on product classification, others on the indication being treated, and still others on the intended patient population. These exclusivity types include:
- Biologic Exclusivity – 12 years
- Orphan Drug Exclusivity (ODE) – 7 years
- New Chemical Entity (NCE) Exclusivity – 5 years
- Qualified Infectious Disease Product (QDIP) Exclusivity – 5 years (added to any existing exclusivity)
- Clinical Investigation Exclusivity (CIE) – 3 years
- Pediatric Exclusivity (PED) – 6 months (added to any existing exclusivity)
- Generic Drug Exclusivity (GDE) – 180 days
New Chemical Entities
When most people think about drug approvals and exclusivity, chances are good that the first drugs that spring to mind are so-called “new chemical entities” or NCEs. While the term itself is simple, its meaning is often misunderstood and misused, even in drug development circles.
According to 21 CFR 314.108(a), an NCE is “a drug that contains no active moiety that has been approved in any other application submitted under 505(b) of the [Federal Food, Drug, and Cosmetic] Act.” The FDA has interpreted this statute to include single active ingredient drugs, fixed combination drugs, and certain prodrugs, provided that the drug contains at least one active ingredient having no previously approved active moieties. However, the statutes carve out an exception for salts, esters, and noncovalent derivatives (e.g., complexes, chelates, clathrates) of approved drugs, which means that if these are the only modifications to an approved active moiety, then the drug does not qualify as an NCE.
In all cases, the FDA’s approach to granting or denying NCE status is structure based (i.e., concerning non-ester covalent bonds), rather than activity based. For example, even if a novel ester is essential to the activity of the molecule or the molecule exhibits different pharmacokinetic or pharmacodynamic properties from the approved drug, the esterified drug will not be eligible for NCE exclusivity.
Additionally, while NCE exclusivity is often (mistakenly) thought of as being reserved only for 505(b)(1) pathway drugs, it is also possible (although less common) to gain NCE exclusivity via the 505(b)(2) pathway. One example of a 505(b)(2) pathway drug that was granted NCE exclusivity is Austedo, a deuterated version of tetrabenazine that was approved in 2017. NCE exclusivity was granted based upon the structure of the drug, which, because it was deuterated, was sufficiently distinct from the reference listed drug (Xenazine) to earn NCE status.
For drugs that do not qualify as a NCE, if new clinical studies (other than bioavailability studies) are required for approval, then the product will still qualify for 3-year Clinical Investigation Exclusivity. This type of exclusivity is the most common type for 505(b)(2) and supplemental applications.
Thanks to the PPACA of 2010, biologics have a considerably longer exclusivity periods than other drug types. Biologic exclusivity conveys 12 years of total market protection. This includes 4 years before an application for a biosimilar (essentially a generic form of a biologic drug product) may be submitted to the FDA and 8 additional years before an application may be approved. The purpose of the extended exclusivity for biologics is to promote innovation and continued development of these novel (and sometimes curative) therapies, some of which can take years longer to develop than traditional small molecule drugs.
Under the Hatch-Waxman act, the first company to submit an Abbreviated New Drug Application (ANDA) to the FDA has the exclusive right to market the generic drug for 180 days. While this exclusivity period pales in comparison to the longer exclusivities enjoyed by branded drugs and biologics, the 180 days of exclusivity is significant in the world of generic drugs. One of the main advantages is that this period allows for the establishment of that first generic drug as the primary low-cost alternative to the branded drug and facilitates early adoption by hospitals and retail pharmacies.
In addition to the “standard” exclusivities described above, there are a few special cases to consider. Each of these are specifically focused on therapies intended to fill unmet medical needs, either for rare diseases (orphan drugs), serious or life-threatening infections (QIDP), or pediatrics (a traditionally understudied population).
Orphan Drug Exclusivity
Orphan drug exclusivity (ODE; 21 CFR 316.31) is used as an incentive to promote the development of products intended to diagnose or treat rare diseases or conditions. As defined by the Orphan Drug Act, rare diseases are those that affect fewer than 200,000 individuals in the US. ODE may also be granted for diseases or conditions affecting greater than 200,000 individuals in the US but for which there is no hope of covering the costs of manufacturing the drug. ODE runs from the time of marketing application approval and for seven years thereafter.
Qualified Infectious Disease Products Exclusivity
QIDP exclusivity is granted to products intended to treat serious or life-threatening bacterial and fungal infections. QIDP designation adds a 5-year extension to any exclusivity for which the product qualifies. For example, for a qualifying NCE, the product would qualify for the 5-year NCE exclusivity and the 5-year QIDP exclusivity, for a total of 10 years of marketing exclusivity.
Pediatric Drug Exclusivity
Pediatric drug exclusivity encourages the development of treatment regimens for pediatric patients, and is awarded when a sponsor conducts and submits pediatric studies on the active moiety in response to a Written Request from the FDA. PED grants an additional 6 months to existing patents and/or exclusivity and also takes on characteristics of the exclusivity to which it is attached.
Marketing exclusivity is a key incentive for drug developers. It provides a fixed period of time following drug approval during which the sponsor can market their drug without direct competition from manufacturers of duplicate or reformulated products. Because exclusivity regulations can be complex and multiple exclusivities may apply to a single product, it is important to understand early on which ones are important for your program and how exclusivity will play into your development, regulatory, and marketing strategies.
Do you have questions about marketing exclusivity? Contact Nuventra to gain expert insights on this and many other drug development topics.